We received queries from one of our blog readers in relation to provision for doubtul debt. We will summarize her queries as below:
a. Is general provision for doubtul debts still allowable? If a client provides an allowance of 60k per year as doubtful debt where the double entry is Dr. bad debts Cr. Provision for doubtful debts - is this practice still allowable?
b. Which IAS standard govern this area
Response from myauditing.blogspot.com
a. No. General provision is no longer allowed. IAS 39 states provision for doubtful debt is required when there's objective evidence that the receivable amount is no longer recoverable. As such, only specific provision is allowed. For accounting entries, it is Dr. Bad Debts Expense, Cr. Provision for Doubtful Debt
b. IAS 39